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What Is Securities Arbitration? | Colling Gilbert Wright and Carter

What Is FINRA Arbitration?

When hiring a broker, you will likely be given many documents to sign, which typically include a mandatory arbitration agreement. This provision essentially means that you waive your rights to go to court in the event of a dispute, and you must bring your claim in FINRA arbitration.

FINRA arbitration is usually quicker, less expensive, and less burdensome than court litigation. The process is complex, however, and it is in your best interests to have the knowledge and skill of an experienced securities arbitration lawyer on your side to maximize your recovery.

At Colling Gilbert Wright & Carter, our accomplished attorneys have extensive experience in these matters. We have the skill, creativity, and business savvy necessary to design an effective, individually-customized approach to pursue the money you deserve.  

What Is FINRA?

Formerly known as the National Association of Security Dealers (NASD), the Financial Industry Regulatory Authority (FINRA) regulates securities firms and securities professionals in the U.S. While FINRA does have regulatory powers, it is not a federal agency. It is the largest self-regulatory organization (SRO) within the securities industry in the United States. It is a not-for-profit entity.

How Does FINRA Arbitration Work?

Unlike a traditional lawsuit, in which your case would be determined in a court by a judge or jury, arbitration is determined by impartial arbitrators who have knowledge and experience with securities cases. FINRA arbitration involves the following steps:

  • Filing a claim: The arbitration process begins when you (the claimant) file a claim with FINRA. Once the claim is filed, FINRA will serve the claim against the stockbrokers or financial advisors (the respondents) you are suing. The respondents then have a limited amount of time to file a response to your claim.
  • Panel selection: Both sides in the claim are given a list of potential arbitrators, from which they rank and strike names, based on their knowledge and experience with them. Using the ranked lists of each side, FINRA will select a panel of three arbitrators. This panel typically includes two public arbitrators who are unaffiliated with the securities industry, and one affiliated arbitrator. If the claim is for less than $100,000, the panel typically consists of only one arbitrator. No hearings take place for claims $25,000 or less unless specifically requested by the claimant.
  • Discovery process: During this stage of the arbitration process, both sides request pertinent records and documentation from the other side. Each party presents the other with the relevant information that may be used at the hearing. Before the hearing begins, both parties must provide copies of the exhibits they intend to present at the hearing, and identify any witnesses who will be called.
  • Hearing: Both sides present their cases during the arbitration hearing. During the hearing, each party has the opportunity to offer exhibits and call witnesses. Both sides can cross examine witnesses, make objections, and give closing arguments.
  • Final judgement: Once the arbitration panel has heard arguments from both parties, a final, binding judgement will be made. The final decision in your case should be issued in writing, no later than 30 business days after the conclusion of your hearing. This judgement will determine whether you will be reimbursed for your claim and whether you are entitled to additional damages. Stockbroker firms and financial advisors have 30 days in which to pay awards made against them. Failing to do so results in the loss of their securities licenses.

Can My Case Settle Before the FINRA Arbitration Hearing?

Yes. Many cases settle prior to the final hearing through FINRA’s voluntary mediation process. During mediation, both parties approve a neutral mediator to facilitate settlement negotiations. However, mediators cannot make any binding decisions or rule on a disputed issue.

Mediation offers certain benefits. Rather than having the result dictated by arbitrators, mediation can offer more control over your outcome. Mediation can potentially save costs, reduce aggravation, and allow both parties to continue with business that would otherwise be delayed.

Even if mediation fails to reach a settlement, it can still provide insight into the strengths and weaknesses of the other side’s case.

Can You Appeal a FINRA Arbitration Decision?

FINRA does not have an internal appeals process. While a limited appeal can be filed in district court, the court will not review the merits of the arbitration judgement. Instead, a district court will review your case for evidence of an unfair process, which may include:

  • Clear misconduct
  • Obvious bias
  • Fraud
  • Corruption
  • Extreme irrationality

Generally, district court judges do not want to interfere with the decision of FINRA’s arbitrators. In the vast majority of cases, it is best to think of the FINRA arbitration process as final and binding. This is why it is so important to work with an experienced securities arbitration lawyer who can prepare and present your strongest case.

Call Our Florida Securities Arbitration Lawyers Today

The FINRA arbitration process can be complex and time-consuming. If you’ve been the victim of securities fraud, you need a seasoned securities arbitration lawyer with the knowledge, skill, and resources necessary to protect your best interests and pursue the money you deserve.

Colling Gilbert Wright & Carter has helped hundreds of investors recover money in FINRA and other securities arbitrations. We are ready and standing by to help you achieve the justice you deserve.

View our awards and settlements.

Call (407) 712-7300 today for a free consultation with an experienced securities arbitration lawyer in Florida. We serve clients across the state, including Orlando, Tampa, Miami, and nearby areas.